Moody's Investors Service downgraded $13 billion in Puerto Rico bonds on Wednesday, citing increasing pessimism about recoveries on the bonds.

The ratings agency dropped from to C from Ca: senior notes of the Government Development Bank for Puerto Rico, Puerto Rico Infrastructure Finance Authority bonds backed by federal rum tax, Employee Retirement System bonds, and the 1998 Resolution bonds from the Highways and Transportation Authority. Moody's expects recoveries on Ca rated bonds at 35% to 60% and on C rated bonds at below 35%.

Moody's also downgraded Puerto Rico Industrial Development Company rent-secured bonds to Ca from Caa3. Moody's expects recoveries on Caa3 rated bonds at 65% to 80%.

In addition Moody's changed the outlook on the commonwealth and seven affiliated obligors to negative from developing.

"The downgrades and outlook revisions reflect persistent pressures on Puerto Rico's economic base that indicate a diminishing perceived capacity to repay," wrote Moody's chief Puerto Rico analyst Ted Hampton.

Moody's also affirmed the ratings on several other Puerto Rico bonds Wednesday including the general obligation and Puerto Rico Sales Tax Finance Corp. (COFINA) bonds.

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